I can speak from experience that there is a general anxiety surrounding investing in international securities. There are additional complexities involved with international investing, not the least of which are currency fluctuations that make year-to-year comparisons confusing, and differences in internal controls at international companies.
For example, one international film producer tells me that the box office reports for films shown in China are never accurate because skimming occurs at the exhibition level. How does that get reflected in results from companies like IMAX (IMAX), or do they ever?
Still, these aren’t reasons to avoid investing in international securities. Some companies are the equivalent of a must-own Dow Jones or S&P 500 stock.
I’ve got three such companies to look at today, all of which are solid dividend stocks. So if you’re looking for yield abroad, start here.
HSBC (HBC) is a brand name you have likely heard of but might have assumed was a domestic company. Not so. It’s based in the U.K. and, as you might have guessed, handles the full spectrum of financial services.
HSBC goes beyond banking, and into mortgages, credit cards, payment services, investment products, asset management, commercial banking, and offers all manner of capital and treasury services. And the company’s presence extends across 81 countries and 6,600 offices.
This financial dividend stock doesn’t lack for size — it generates well over $66 billion in revenue every year, it has tremendous liquidity and has that all-important brand name.
Meanwhile, HSBC pays out more than 4% in dividends, usually distributed via three smaller dividends and one larger dividend.
The company’s annual report provides concise highlights of where the business is and where it’s going. Group revenue fell 4.2% while data revenue increased 7.5%. Adjusted operating profit was up 3.7% to 12 billion euros and free cash flow was 5.6 billion euros. Adjusted EPS were up 5%.
The sale of its Verizon Wireless stake back to Verizon (VZ) for $130 billion, of which $58.9 billion is in cash, merely provides Vodafone with even more cash on its balance sheet to pay its dividend — not that it needed it. Dividends have long been manageable under free cash flow, and cash on hand — which was $86 billion in March — is far above that now.
I compare the company to AT&T because Vodafone’s 400 million worldwide customers create the aforementioned massive free cash flow for the company, which is paid out to investors in the form of a 4.3% yield. This is a dividend stock worth owning.
Banco Santander (SAN) is not the rock-solid financial company it used to be but it’s still doing fine. It services huge swaths of the global Hispanic community, including in Brazil, Spain, Mexico, Portugal, Chile and Argentina, along with the U.S., U.K., Germany and Poland.
It is a gigantic bank with the complete range of services like you’d find here in the U.S., engaging in consumer banking, business and investment banking, pension plans, and so on.
With more than 14,000 branches, it has a wide reach and a trusted brand name.
Santander proudly refused any capitalization assistance during the global financial crisis, which says a lot about management.
So does SAN’s 7.5% yield.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.